THE FLORIDA L]CGISLATURE

OFFICE OF ECONOMIC AND D EMOGRAPHIC RESEARCH

ORID6

DON GAETZ President ofthe Senate

WILL WEATHERFORD Speaker ofthe House of

Representatives

D ECEIVENovember 4, 2013

Nov 4 20s The Honorable Pamela Jo Bondi, Attorney General Office of Attorney General State of Fiorida OF THEMTORNEY GENE44.

Not mE CANOL The Capitol PL-01 Tallahassee, Florida 32399-10S0

Dear Attorney General Bondi:

Section 100.371(S)(a), F.S., requires that the Financial Inspact Estimating Conference submit a financial impact statement to the Attorney General and Secretarv of State within 45 days after receipt of an initiative petition from the Secretary of State.

By this letter, the Financial impact Estimating Conference is submitting the attached financial impact statement for the initiative petition titled Use of Marijucnafor Certain Medical Conditions, Serial Number 13-02.

Amy J. Bak , C dinator Vlichael Anway, Policy foordina r Office of E nomic and Demographic Research xecutive Office of the Governor

J. ic e , Budget Chief carlet D. Pigott, Staff Directo House Health Care Appropriations enate Appropriations Subcommittee on Health Subcommittee ind Human Services

Room 574, Claude Pepper Building, 111 W. Madison Street, Tallahassee, FI 32399-6588 Telephone (850) 487-1402 FAX (850)922-6436

INITIATIVE FINANCIAL INFORMATION STATEMENT FOR USE OF MARIJUANA FOR CERTAIN lHIEDICAL CONDITIONS, #13-02

FINANCIAL IMPAC1 STATEMENT

increased costs from this amendment to state and local governments cannot be determined. There will be additional regulatory and enforcement activities associated with the production and sale of medical marijuana. Fees will offset at least a portion of the regt latory costs. While sales tax may apply to purchases, changes in revenue cannot reasonably be de:ermined since the extent to which medical marijuana will be exempt from taxation is unclear withcut legislative or state administrative action.

INITIATIVE FINANCIAL INFORIV ATION STATEMENT FOR USE OF MARIJUANA FOR CERTA IN MEDICAL CONDITIONS

SUMMARY OF INITIATIVE FINANCIA . INFORMATION STATEMENT

The amendment allows the use of medical marijuana fo'certain specified medical conditions, as well as other conditions, for which a physician licensed in Florica believes the medical use of marijuana would likely outweigh the potential health risks for the patient in addition, a process is established for the sale of medical marijuana to qualifying patients and designated caregivers. Based on the information provided through public workshops and staff research, t1e Financial Impact Estimating Conference expects that the proposed amendment will have the follFwing financial effects:

042According to the final analysis provided by the Dapartment of Health, the department will incur an estimated $1.1million in costs each year to c mply with the regulatory responsibilities assigned to it by the constitutional amendment. These costs will likely be offset through fees charged to the medical marijuana industry and t sers, but this may require further action by the Legislature.

042The Department of Business and Professional Regulation, the Agency for Health Care Administration, and the Department of Agricultt re and Consumer Services do not expect the amendment's passage to produce a significant iripact on their regulatory functions. To the extent regulatory impacts occur, they will likely t e offset through fees charged to the affected industries.

042The Department of Highway Safety and Motor Vohicles, the Police Chiefs Association, and the Sheriffs Association expect additional law enforc ement costs based on the experience from other states that have similar amendments or laus, but the magnitude could not be determined at this time.

042Other state and local agencies were unable to quantify the amendment's impact, if any, on the services they provide.

042The Conference has determined that the purchase of medical marijuana is subject to Florida sales and use tax since medical marijuana is tangible personal property for the purposes of Chapter 212, Florida Statutes, unless a specific exemption exists.

042After testimony from the Department of Revenut , the conference determined that agricultural-related exemptions apply to sales of medical mar juana when the grower or cultivator sells or dispenses the product directly to the end-user or designated caregiver. However, if the grower or cultivator sells the product to a third-party rete iler (a non-taxable transaction) which then sells or dispenses the product to the end-user or a caregiver, the agricultural exemption on the final sale is lost and that transaction becomes tax:ble. Since the sponsors indicated that the proposed amendment was drafted to allow various levels of industry integration, the potential for both taxable and exempt activities exists. In tJe case of a segmented market structure, the determination of whether medical marijuana is a ommon household remedy (and therefore exempt) becomes significant. Until this determination is made by the Department of Revenue and/or the Department of Business and Professio ial Regulation or by a future action of the Legislature, the tax treatment of a sale through a hird-party to the end-user is uncertain.

042The magnitude of the impact on property taxes, e ther positive or negative, cannot be determined.

INITIATIVE FINANCIAL INFORMATION STATEMENT FOR USE OF MARIJUANA FOR CERTAI MEDICAL CONDITIONS

SUMMARY OF INITIATIVE FINANCIAl INFORMATION STATEMENT

The amendment allows the use of medical marijuana for certain specified medical conditions, as well as other conditions, for which a physician licensed in Florida believes the medical use of marijuana would likely outweigh the potential health risks for the patient. In addition, a process is established for the sale of medical marijuana to qualifying patients and designated caregivers. Based on the information provided through public workshops and staff research, the Financial Impact Estimating Conference expects that the proposed amendment will have the following financial effects:

042According to the final analysis provided by the Dnpartment of Health, the department will incur an estimated $1.1million in costs each year to cc mply with the regulatory responsibilities assigned to it by the constitutional amendment. These costs will likely be offset through fees charged to the medical marijuana industry and u;ers, but this may require further action by the Legislature.

042The Department of Business and Professional Regulation, the Agency for Health Care Administration, and the Department of Agricultu e and Consumer Services do not expect the amendment's passage to produce a significant irr pact on their regulatory functions. To the extent regulatory impacts occur, they will likely b 3 offset through fees charged to the affected industries.

042The Department of Highway Safety and Motor Vc hicles, the Police Chiefs Association, and the Sheriffs Association expect additional law enforc( ment costs based on the experience from other states that have similar amendments or lars, but the magnitude could not be determined at this time.

042Other state and local agencies were unable to qu intify the amendment's impact, if any, on the services they provide.

042The Conference has determined that the purchas 3 of medical marijuana is subject to Florida sales and use tax since medical marijuana is tangi 31e personal property for the purposes of Chapter 212, Florida Statutes, unless a specific ex imption exists.

042After testimony from the Department of Revenue, the Conference determined that agricultural-related exemptions apply to sales of medical marijuana when the grower or cultivator sells or dispenses the product directly to the end-user or iesignated caregiver. However, if the grower or cultivator sells the product to a third-party rett iler (a non-taxable transaction) which then sells or dispenses the product to the end-user or i caregiver, the agricultural exemption on the final sale is lost and that transaction becomes taxuble. Since the sponsors indicated that the proposed amendment was drafted to allow variot s levels of industry integration, the potential for both taxable and exempt activities exists. In ti;e case of a segmented market structure, the determination of whether medical marijuana is a.:ommon household remedy (and therefore exempt) becomes significant. Until this determinttion is made by the Department of Revenue and/or the Department of Business and Professiot tal Regulation or by a future action of the Legislature, the tax treatment of a sale through a hird-party to the end-user is uncertain.

042The magnitude of the impact on property taxes, e ther positive or negative, cannot be determined.

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FINANCIAL IMPAC E STATEMENT

increased costs from this amendment to state and local governments cannot be determined. There will be additional regulatory and enforcement activities associated with the production and sale of medical marijuana. Fees will offset at least a portion of the reg ilatory costs. While sales tax may apply to purchases, changes in revenue cannot reasonably be datermined since the extent to which medical marijuana will be exempt from taxation is unclear without legislative or state administrative action.

l. SUBSTANT VE ANALYSIS

A. Proposed Amendment Ballot Title:

Use of Marijuanofor Certain Medical Condition..

Ballot Summary:

Allows the medical use ofmarijuanafor individupts with debilitating diseases as determined by a licensed Florida physician. Allows caregivers to (ssist patients' medical use ofmarijuana. The Department of Health shall register and regulat centers that produce and distribute marijuana for medical purposes and shall issue identificatic a cards to patients and caregivers. Applies only to Florida law. Does not authorize violations ofderal law or any non-medical use, possession or production ofmarijuana.

Proposed Amendment to the Florida Constitution:

ARTICLE X, SECTION 29. Medical marijuana pro( uction, possession and use.

(a) PUBLIC POLICY. (1) The medical use of marijuana by a qvalifying patient or personal caregiver is not

subject to criminal or civil liability or panctions under Florida law except as provided in this section.

(2) A physician licensed in Florida shall n at be subject to criminal or civil liability or sanctions under Florida law for issuira a physician certification to a person diagnosed with a debilitating medica condition in a manner consistent with this section.

(3) Actions and conduct by a medical marijuana treatment center registered with the Department, or its employees, as pernitted by this section and in compliance with Department regulations, shall not be subject to criminal or civil liability or sanctions under Florida law except as provided in this section.

(b) DEFINITIONS. For purposes of this section, th ! following words and terms shall have the following meanings:

(1) "Debilitating Medical Condition" mea ls cancer, glaucoma, positive status for human immunodeficiency virus (HIV), acquire d immune deficiency syndrome (AIDS), hepatitis C, amyotrophic lateral sclerc sis (ALS), Crohn's disease, Parkinson's disease, multiple sclerosis or other conditions or which a physician believes that the medical use of marijuana would likely outweigh the potential health risks for a patient.

(2) "Department" means the Departmen of Health or its successor agency.

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(3) "Identification card" means a document issued by the Department that identifies a person who has a physician certifit ation or a personal caregiver who is at least twenty-one (21) years old and has agreed to assist with a qualifying patient's medical use of marijuana.

(4) "Marijuana" has the meaning given cannabis in Section 893.02(3), Florida Statutes (2013).

(5) "Medical Marijuana Treatment Cer ter" means an entity that acquires, cultivates, possesses, processes (including development of related products such as food, tinctures, aerosols, oils, or ointmer ts), transfers, transports, seils, distributes, dispenses, or administers marijuan i, products containing marijuana, related supplies, or educational materials ta qualifying patients or their personal caregivers and is registered by the Departmer t.

(6) "Medical use" means the acquisiticn, possession, use, delivery, transfer, or administration of marijuana or rela:ed supplies by a qualifying patient or personal caregiver for use by a qualifying pa ient for the treatment of a debilitating medical condition.

(7) "Personal caregiver" means a perscn who is at least twenty-one (21) years old who has agreed to assist with a qualifying patient's medical use of marijuana and has a caregiver identification card issued 3y the Department. A personal caregiver may assist no more than five (5) qualifying patients at one time. An employee of a hospice provider, nursing, or medic il facility may serve as a personal caregiver to more than five (5) qualifying patien s as permitted by the Department. Personal caregivers are prohibited from cons aming marijuana obtained for the personal, medical use by the qualifying patier t.

(8) "Physician" means a physician who s licensed in Fiorida. (9) "Physician certification" means a written document signed by a physician, stating

that in the physician's professional ( pinion, the patient suffers from a debilitating medical condition, that the potentia. benefits of the medical use of marijuana would likely outweigh the health risks for the patient, and for how long the physician recommends the medical use of mas ijuana for the patient. A physician certification may only be provided after the phys clan has conducted a physical examination of the patient and a full assessment of he patient's medical history.

(10)"Qualifying patient" means a person who has been diagnosed to have a debilitating medical condition, who has a physician certification and a valid qualifying patient identification card. If the Departmen; does not begin issuing identification cards within nine (9) months after the effe:tive date of this section, then a valid physician certification will serve as a patient id 3ntification card in order to allow a person to become a "qualifying patient" until t je Department begins issuing identification cards.

(c) LIMITATIONS, (1) Nothing in this section shall affect laus relating to non-medical use, possession,

production or sale of marijuana. (2) Nothing in this section authorizes tht use of medical marijuana by anyone other

than a qualifying patient. (3) Nothing in this section allows the opt ration of a motor vehicle, boat, or aircraft

while under the influence of marijuat a. (4) Nothing in this law section requires ti e violation of federal law or purports to give

immunity under federal law.

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(5) Nothing in this section shall require any accommodation of any on-site medical use of marijuana in any place of educat on or employment, or of smoking medical marijuana in any public place.

(6) Nothing in this section shall require any health insurance provider or any government agency or authority to eimburse any person for expenses related to the medical use of marijuana.

(d) DUTIES OF THE DEPARTMENT. The Departn ent shall issue reasonable regulations necessary for the implementation and enforcement of this section. The purpose of the regulations is to ensure the availability and safe use of medk al marijuana by qualifying patients. It is the duty of the Department to promulgate regulatior s in a timely fashion.

(1) Implementing Regulations. In order :o allow the Department sufficient time after passage of this section, the following regulations shall be promulgated no later than six (6) months after the effective date of this section:

a. Procedures for the issuance af qualifying patient identification cards to people with physician certifi:ations, and standards for the renewal of such identification cards.

b. Procedures for the issuance 5f personal caregiver identification cards to persons qualified to assist w th a qualifying patient's medical use of marijuana, and standards fo the renewal of such identification cards.

c. Procedures for the registrati n of Medical Marijuana Treatment Centers that include procedures for i e issuance, renewal, suspension, and revocation of registration, at standards to ensure security, record keeping, testing, labeling, inspection, ;nd safety.

d. A regulation that defines the amount of marijuana that could reasonably be presumed to be an adequate supply for qualifying patients' medical use, based on the best available esidence. This presumption as to quantity may be overcome with evidence i f a particular qualifying patient's appropriate medical use.

(2) Issuance of identification cards and registrations. The Department shall begin issuing qualifying patient and person I caregiver identification cards, as well as begin registering Medical Marijuana reatment centers no later than nine months (9) after the effective date of this sec ion.

(3) If the Department does not issue regt lations, or if the Department does not begin issuing identification cards and registering Medical Marijuana Treatment Centers within the time limits set in this sectit n, any Florida citizen shall have standing to seek judicial relief to compel compliauce with the Department's constitutional duties.

(4) The Department shall protect the con identiality of all qualifying patients. All records containing the identity of qua ifying patients shall be confidential and kept from public disclosure other than for valid medical or law enforcement purposes.

(e) LEGISLATION. Nothing in this section shall lim t the Legislature from enacting laws consistent with this provision.

(f) SEVERABILITY. The provisions of this section ; re severable and if any clause, sentence, paragraph or section of this measure, or an ap)lication thereof, is adjudged invalid by any court of competent jurisdiction other provisions shall continue to be in effect to the fullest extent possible.

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Effective Date:

Article XI, Section 5(e), of the Florida Constituti)n states that, unless otherwise specified in the Florida Constitution or the proposed constitutional amendment, the proposed amendment will become effective on the first Tuesday after the first Monday in January following the election. This amendment does not specify an effective fate and will be effective as stated in Article Xi, Section 5(e), of the Fiorida Constitution. Howe,er, the amendment delays implementation of certain provisions by allowing the Department of Health six months after the effective date to promulgate regulations and nine months after t he effective date to begin issuing identification cards.

B. Substantive Effect of Proposed Amendment

Input Received from Proponents and Opponents

The Conference sought input from those group who were on record as supporting or opposing the petition initiative. The proponents chose nct to provide a response to a request for overall input on the initiative. However, a representatie responded to a specific request from staff regarding the market structure envisioned by the sponsors.

An opponent group, Save Our Society from Drugs (S.O.S.), a non-profit drug policy organization based in St. Petersburg, submitted written testimony specific to the petition initiative. The testimony focused on the status of marijuana as not approved by the federal Food and Drug Administration (FDA) and the resulting unregula :ed nature of the use of marijuana, emphasizing that "crude (smoked) marijuana does not meet 1he standards of modern medicine." The testimony also noted that "the approval of medi:ines and the protection of consumers are the responsibility of the FDA, not state legislators, nr t voters and not governors petitioning for marijuana to be rescheduled." The testimony al:o expressed concerns relating to: potential impacts on public safety, with an emphasis on dugged driving; environmental impacts of marijuana production, including water quality an:1 water use, wildlife, and wildfires; and the fiscal impact of regulating and policing "pot shops."

Background

Current Legal Status of Marijuana in Florida

Florida law defines Cannabis as "all parts of any plant of the genus Cannabis, whether growing or not; the seeds thereof; the resin extracted fron any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparnion of the plant or its seeds or resin"l and places it, along with other sources of tetrahydroc innabinol (THC), on the list of Schedule i drugs.2 Schedule I drugs are substances that have a high potential for abuse and no currently accepted medical use in treatment in the United tates. As a Schedule i drug, possession and trafficking in cannabis carry criminal penalties tha; vary from a misdemeanor of the first degree3 up to a felony of the first degree with a possible rninimum sentence of 15 years in prison and a

S. 893.02(c), F.S. 2 S. 893.03(c)7. and 37., F.S.

For possessing or delivering less than 20 grams. See s. 893.13(3) and 6)(b), F.S.

I

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$200,000 fine.4 Paraphernalia5 that is sold, manufactured, used, or possessed with the intent to be used to plant, propagate, cultivate, grow, har test, manufacture, compound, convert, produce, process, prepare, test, analyze, pack, rc pack, store, contain, conceal, inject, ingest, inhale, or otherwise introduce into the human body a controlled substance is also prohibited and carries criminal penaities ranging from a mis Jemeanor of the first degree to felony of the third degree.'

The Necessity Defense in Florida

Despite the fact that the use, possession, and sale of marijuana is prohibited by state law, Florida courts have found that circumstances car necessitate medical use of marijuana and circumvent the application of any criminal penalties. The necessity defense was successfully applied in a marijuana possession case in Jenks v. State7 where the First District Court of Appeal found that "section 893.03 does not preclude the defense of medical necessity" for the use of marijuana if the defendant:

042Did not intentionally bring about the ::ircumstance which precipitated the unlawful act;

042Could not accomplish the same objective using a less offensive alternative available; and

042The evil sought to be avoided was mc re heinous than the unlawful act.

In the cited case the defendants, a married couple, were suffering from uncontrollable nausea due to AIDS treatment and had testimony from ti eir physician that he could find no effective alternative treatment. Under these facts, the Firs t District found that the Jenks met the criteria for the necessity defense and ordered an acquitte I of the charges of cultivating cannabis and possession of drug paraphernalia.

Medical Mari{uana laws in Other States

Currently, 20 states and the District of Columbia8 1ave some form of law that permits the use of marijuana for medicinal purposes. These laws vaiy widely in detail but most are similar in that they touch on several recurring themes. Most state laws include the following in some form:

042A list of medical conditions for which i practitioner can recommend the use of medical marijuana to a patient. o Nearly every state has a list of me Jical conditions though the particular

conditions vary from state to state. Most states also include a way to expand

* Trafficking in more than 25 pounds, or 300 plants, of cannabis is a fek ny of the first degree with a minimum sentence that varies from 3 to 15 years in prison depending on the amount of cannab s. See s. 893.135(1)(a), F.S. s As defined in s. 893.145, F.S. 6 S. 893.147, F.s.

582 So. 2d 676 These states include Alaska, Arizona, California, Colorado, Connecticui, Delaware, Hawaii, Illinois (effective 2014), Maine,

Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshir , New Jersey, New Mexico, Oregon, Rhode Island, Vermont, and washington. California was the first to establish a medic :|marijuana program in 1996 and illinois was the most recent state to pass medical marijuana legislation in August of 2013. Ill nois legislation does not become effective until 2014. See http://www.ncsl.org/issues-research/health/state-medical-marijua la-laws.aspx. Last visited on Oct. 17, 2013.

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the list either by allowing a sta e agency or board to add medical conditions to the list or by including a "catch all" phrase.' Most states require that the patient receive certification from at le st one, but often two, physicians designating that they have a qualifying con ition before they can be issued an ID card.

042Provisions for the patient to designate one or more caregivers who can possess the medical marijuana and assist the p2 tient in preparing and using the medical marijuana. o The number of caregivers allow3d and the qualifications to become a caregiver

vary from state to state. Most !tates allow 1 or 2 caregivers and require that they be at least 21 years of age 3nd, typically, cannot be the patient's physician. Caregivers are generally allowed to purchase or grow marijuana for the patient, be in possession of the allowed quantity of marijuana, and aid the patient in using the marijuana, but are str ctly prohibited from using the marijuana themselves.

042A required identification card for the patient, caregiver, or both that is typically issued by a state agency.

042A registry of people who have been ssued an ID card. o A method for registered patiento and caregivers to obtain medical marijuana.

042General restrictions on where medic al marijuana may be used. 042Provisions allowing a patient to eithor self-cultivate marijuana, creating regulated

marijuana "dispensaries" where a p tient may purchase marijuana, or both. The regulations governing such dispensa les, in states that allow them, vary widely.

Medical Marijuana laws and the Federal Governmer t

Regardless of whether an individual state has allc wed the use of marijuana for medicinal purposes, or otherwise, the Federal Controlled Substances Act lists it as a Schedule i drug with no accepted medical uses. Under federal law po: session, manufacturing, and distribution of marijuana is a crime.1 Although state medical marijuana laws protect patients from prosecution for the legitimate use of marijuana under the guidelines established in that state, such laws do not protect individuals from prosecution under federal law should the federal government choose to act on those laws.

In August of 2013, the United States Justice Depa tment issued a publication entitied "Smart on Crime: Reforming the Criminal Justice System for the 21" Century."" This document details the federal government's changing stance on low-lev 11 drug crimes announcing a "change in Department of Justice charging policies so that certain people who have committed low-level, nonviolent drug offenses, who have no ties to larte-scale organizations, gangs, or cartels will no longer be charged with offenses that impose draconian mandatory minimum sentences. Under the revised policy, these people would instead rec elve sentences better suited to their individual conduct rather than excessive prison terms more 3ppropriate for violent criminals or drug

9 Such as in California's law that includes "any other chronic or persiste1t medical symptom that either: Substantially limits the ability of the person to conduct one or more major life activities as def ned in the Americans with Disabilities Act of 1990, or if not alleviated, may cause serious harm to the patient's safety or physical or mental health." 1The punishments vary depending on the amount of marijuana and tl e intent with which the marijuana is possessed. See http://www.fda.gov/regulatoryinformation/legislation/ucm148726.htr #cntisbd. Last visited Oct. 17, 2013, 11See http://www.justice.gov/ag/smart-on-crime.pdf. Last visited on O t. 17, 2013

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kingpins." This announcement indicates the jutice department's relative unwillingness to prosecute low-level drug cases leaving such pr 3secutions largely up to state authorities.

Proposed Florida Laws

Distinct from the petition initiative, Florida legi lation was proposed to enact concepts similar to the subject of the amendment. During the 2013 legislative session, identical bills were introduced in the Senate and House of Representatives relating to medical cannabis. The bill established regulatory responsibilities and rule naking authority for the Department of Health (DOH) and the Department of Business and Pro'essional Regulation (DBPR), and provided rulemaking authority for the Department of Re"enue (DOR) specific to taxation and reporting responsibility for specified entities. The bili: 042 Authorized a qualifying patient and the patient's qualified caregiver to possess and

administer medical cannabis to a qualif,ing patient, and to possess and use paraphernalia for specified purposes;

042 Provided procedures and requirements for DOH administration; 042 Authorized a physician to recommend i se of medical cannabis under specified

procedures and requirements; 042 Required DBPR to regulate licensure of -:ultivation centers and dispensaries, under

related procedures and requirements; 042 Established a medical cannabis section within DBPR, including procedures and

requirements to authorize a medical car nabis farm to possess, cultivate, and manufacture medical cannabis, medical :annabis-based products, and marijuana plants for wholesale in this state, including pernitting and licensing procedures and fees, administrative fines, license suspension, and injunctive relief.

042 Required rule adoption by specified dates; 042 Provided that use of medical cannabis is a defense to certain offenses, and does not

create defense to certain other offenses 042 Made conforming revisions to a variety cf criminal provisions, including changes to the

Offense Severity Ranking Chart; 042 Included a severability clause; and 042 Provided an effective date of.luly 1, 2013.

The bill stipulated that fees established by DOH n ust offset ali expenses of implementing and administering the provisions of the bill, specified ee caps for DBPR permitting purposes, and indicated that fees collected by DOH, DBPR, and DOR be applied first to administering the responsibilities assigned under the provisions. Se late Bill (SB) 1250, introduced by Senator Clemens and one co-sponsor, was referred to fou committees of reference. House Bill 1139, introduced by Representative Edwards and five cc -sponsors, was referred to four committees of reference. A related public records exemption bil, SB1214, was also filed by Senator Clemens. When the 2013 session ended, each bill died in its initial committee of reference, having not been heard.

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Potential Users of Medical Marijuana

The Florida Legislature's Office of Economic and Jemographic Research (EDR) developed six approaches that estimate the potential number of medical marijuana users in Florida as of April 1, 2015. Approach I draws on the experience of ther states. Approaches 11-V attempt to capture eligible users with the specified medical :onditions in the proposed baliot initiative, except "other conditions." It is not possible to pr eciseiy estimate the number of users that would qualify under "other conditions" as these :onditions are currently unknown and to be determiried by the physician when he or she belives that the medical use of marijuana would likely outweigh the potential health risks for a pa tient. Approach VI uses the number of illicit recreational marijuana users as a guide.

Estimates of Potential Florida Medical Marijuana Users

Estimation Approach April 1, 2015 l. States with medical marijuana laws 452 to 417,252 II. Disease prevalence 1,295,922 111. Disease incidence 116,456 IV. Use by cancer patients 173,671 V. Deaths 46,903 VI. Self-reported marijuana use 1,052,692 to 1,619,217 Range 452 to 1,619,217

The following is a summary of each of these approaches.

Approach I. States with Medical Marijua ia 1.aws Approach I applies rates of medical marijrana use from other states to Florida's 2015 projected population. Using the current ( xperience of 16 other states, there may be an estimated 452 to 417,252 Floridians using medical marijuana in 2015. The lower range of the estimate is more likely if the medic il marijuana program is rolled out slowly, such as in New Jersey, or faces implementatior , administrative, and/ or legal challenges that will limit the number of registrants in the irst year. The higher range of the estimate may be more likely at full implementatior of a more mature program, such as in Colorado.

Approach II. Disease Prevalence Approach Il uses disease prevalence rates (proportion of people alive diagnosed with a certain disease) for cancer, hepatitis C, an;l HIV to determine the number of eligible patients with the conditions specified in the proposed bailot initiative. There will be an estimated 1,295,922 patients alive in 2010 that have been diagnosed with cancer, hepatitis C, or HIV during their lifetime. T iese patients represent the pool of eligible patients for medical use of marijuana. Pre alence data for the remaining conditions specified in the proposed ballot initiative here not available. In addition, there are unspecified "other conditions" in the profosed ballot initiative which cannot be estimated under this approach.

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Approach Ill. Disease Incidence Approach Ill uses disease incidence rates (proportion of people newly diagnosed with a certain disease) for cancer, hepatitis C, H V, and amyotrophic lateral sclerosis (ALS) to determine the number of eligible patient; with the conditions specified in the proposed ballot initiative. Disease incidence cases are a subset of disease prevalence cases, so Approach 111 has a smaller estimate than Approach II. There will be an estimated 116,456 patients newly diagnosed with cincer, hepatitis C, HIV, or ALS in 2015 in Florida. These patients represent the pol of eligible patients for medical use of marijuana. Incidence data for the remair ing conditions specified in the proposed ballot initiative were not avaliable. In addition, there are unspecified "other conditions" in the proposed baliot initiative which cannot b e estimated under this approach.

Approach IV. Use by Cancer Patients Approach IV uses medical marijuana penntration rates by disease, specifically cancer, to estimate medical marijuana users in Flori Ja. The number of Florida cancer patients that are likely to use medical marijuana in 20J1is calculated by applying the average penetration rate among cancer patients t'om seven other states to the Florida number of cancer patients. Assuming Florida will have the same average proportion of cancer patients in the total medical marijuana u!ers as these seven states, the number of medical marijuana users with cancer is gr 3wn to represent total medical marijuana users with all conditions in Florida in 201L. The latter is then adjusted to produce 173,671medical marijuana users with all conditions in 2015.

Approach V. Deaths Approach V assumes that mostly termina ly ill patients will use medical marijuana. Thus, it uses 2012 death rates by disease for the specified diseases, excluding glaucoma and ALS for which no data were available, in t le proposed ballot initiative to estimate the number of users. Adjusting these rates tc 2015 population projections produces 46,903 potential medical marijuana patients witt the specified conditions. In addition, there are unspecified "other conditions" in the 3roposed ballot initiative which cannot be estimated under this approach.

Approach VI. Self-Reported Marijuana Une (Illicit Recreational Use) Approach VI presents self-reported illicit inarijuana use from the 2011 National Survey on Drug Use and Health. Adjusting 2011 t urvey results to the 2015 Florida population projections shows that there may be an e timated 1,619,217 self-reported recreational users of marijuana in Florida. If we exclute the population 18 to 24 from this estimate since they would not be as likely to suffer from the debilitating conditions envisioned in the ballot initiative as their older counternarts, it is estimated that there may be 1,052,692 self-reported recreational user: of marijuana in Florida. Approach VI was included because some of the current illic t use may be for medical purposes. This estimation approach has been used by other states to estimate recreational marijuana use.

The Conference requested EDR to estimate the ex_ent to which a pill mill scenario and medical

042marijuana tourism may affect the potential number of users of medical marijuana.

Pi// Mills: The potential medical marijuan i population was compared to the estimates of the population illicitly using pain reliev rs for nonmedical reasons to examine

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whether "pill miiis" can develop for m3dical marijuana. Applying use rates from the 2011 National Survey on Drug Use an( Health, it is estimated that there will be 676,099 pain reliever users for nonmedical reasons in 2015, with higher rates among the 12 to 17 and 18 to 24 age groups compared to the 25 and over age group. The multi-step process consisting of (1) an examinatiten and assessment by a physician in order for a patient to receive a physician certifica ion and (2) the application process through the Department of Health for an identification card may dissuade a pill mill scenario. Further, the amendment allows the De partment of Health to issue implementing regulations, and allows the Legislature to enact laws consistent with the amendment that may provide additional regulatory protection.

042MedicalMarijuana Tourism: The mult step process described above would discourage shorter-duration visitors from particip ting in Florida's medical marijuana program. Snowbirds (visitors staying one month Dr longer) were used as a potential universe for medical marijuana tourists. An estima ed 17,178 to 41,271 snowbirds may apply for ID cards.

For a variety of reasons, the estimates of pill mi I and medical tourism were included to "color" the final estimate of the potential number of m dical marijuana users and are not meant to be additive to approaches 1- VI.

After careful consideration and review of all me:hods, the Conference determined that the likely number of potential users of medical marijuana upon full implementation of the amendment would be less than 450,000 persons per year.

C. Fiscal Impact of Proposed Amendment

Summary of the Department of Health's Analysis

The Department's Planning Assumptions The analysis from the Department of Health ass mes the proposed Constitutional Amendment entitled "Use of Marijuana for Certain Medical Conditions" will be approved by the Florida voters and will have an effective date of January 1, 2015. The analysis further assumes the Florida Department of Health will: (1) promulgato rules by June 30, 2015, (2) issue qualified patient and personal caregiver identification carc s prior to October 1, 2015, and (3) register Medical Marijuana Treatment Centers prior to October 1, 2015.

The department analysis provides general planning assumptions, as well as a series of assumptions specific to marijuana, physician autt ority under state and federal law and regulations, patient and caregiver identification c ards, medical marijuana treatment centers, and the department's responsibilities.

The department estimates that when the prograr) is fully implemented, the number of annual program participants to be: (1) 417,252 qualified 3atients, (2) 250,351 personai caregivers and (3) 1,789 registered Medical Marijuana Treatmen Centers. These estimates were derived based on experience data for the states of Colorado and Oregon.

Program Components The Florida Department of Health will establish a : lorida Medical Marijuana Program which supports: (1) physician issuance of certification, (21 patient and caregiver identification cards, (3)

Page 11 of 16

medical marijuana treatment center registration and regulation, and (4) regulation of the adequate supply of marijuana for a qualifying pailent's medical use. For each of these components, the department's analysis cited rek vant definitions as provided in the petition initiative language and indicates the department s responsibilities relative to each component.

Program Costs According to the final analysis provided by the DE partment of Health, the department will incur an estimated $1.1million in costs each year to cc uply with the regulatory responsibilities assigned to it by the constitutional amendment. Jetails regarding these costs are in the following table.

Cost Analysis Cost of Year 1 Year 2 Description Implementation 2015 2016 Program Staff $287,654 $238,181 Year 1 R tcurring FTE. Program Manager, $60,000 salary, fringe (35%) & State Health expense package ($15,541). One-time contracted positions- Rule Office making t upport $20 hr/2080 hours plus fringe (35%) and contract

overhea f (4%). Educator $20.00 hr/1500 hours plus fringe (35%) and contract overhead (4%). Cost to disseminate materials to physicians ($7,000) Year 2 P ogram Manager and 2.0 additional recurring FTEs to manage establishd program. Environmental Consultant ($82,587) and Senior Clerk ($E7,993). Year 2 includes 750 hours of contracted time to refresh training naterials.

Data system $238,400 $32,000 Year 1B !siness Analysis for program and data system development $85 implementation per hour: for 1040 hours. One-time contractual. Cost to design, and develop, test and data system based on business requirements. One-maintenance time con ractual 1800 hours at $75.00 per hour ($135,000) and $15,000

for harduare. Year 2 A :nual cost of help desk and software maintenance 800 hours per year it $40 per hour. Recurring $32,000 after Year 1 impleme ltation.

Treatment $564,129 $790,755 Year 12! % of Year 2 cost for services ($197,689). One-time cost for 10 facility state velicles @ $35,000 each, 10 pentablets @ $1,500, and VPN inspections, connecti ity service $48 per month for 3 months in year 1-$1,440. reinspections, Year 2 Cc st for services for 12 months -9,303 services @ $85.00 per and complaint service = $790,755. 1,789 treatment centers 7,156 quarterly investigations inspectio 1s, 1,789 reinspections (25% rate) and 358 complaint

investiga ion (20% of centers). Funds 13.25 Environmental Specialist II's to condu t inspections & investigations. (Salary $37,357, Fringe $12,451 and Travel $9,606) for a total of $787,236. Interagency Agreement with DOACSfr r inspections of cultivators/processors=$2,500 per year. Miscellar eous cost of services=$1,019.

Total $1,090,183 $1,060,936

Requested Information from State Agencies

The following table reflects a summary of informa ion gleaned from several agencies that were asked to appear before the Conference. Note the information specific to the Department of Revenue is addressed separately under tax discust ions that appear subsequently in this document.

Page 12 of 16

State / Local Agency

Florida Department of Health

Florida Department of Children and Families

Substance Abuse and Mental Health Program

Florida Agency for Health Care Administration

Florida Board of Pharmacy

Florida Department of Business and Professional Regulation (DBPR)

Division of Drugs, Devices and Cosmetics

Florida Department of Agriculture and Consumer Services

Florida Department of 1.aw Enforcement Florida Office of the Attorney General

Florida Department of Highway Safety and Motor Vehicles

Florida Association of Counties

Florida League of Cities

Florida Police Chiefs Association

Florida Sheriffs Association

Date info Provided

10/21/2013 11/1/2013

10/28/2013

.

10/28/2013

10/28/2013

10/28/2013 10/31/2013

10/28/2013

10/22/2013

10/24/2013

10/31/2013

10/29/2013

10/30/2013

10/25/2013

10/21/2013 10/27/2013

Result

Written freliminary and final analyses and testimony showing $1.1 million in ongoing annual costs, likely to be offset by regulatory fees (see 3receding section). The depa tment indicated that the budget impact cannot be determin id. The budget for these services is set in the General Approprit tions Act, which is controlled by the Legislature and these services are not an entitlement. Discussec the possible impact regarding "personal care givers". The activi y would fall into current regulatory oversight and would not signifl::antly change regulatory duties. Health care clinics would on y be impacted if the clinics accept 3'd p@ reimburst ment. The dispe tsaries would be a separate facility or entity and the certificat( is not a prescription, so there would be no additional costs. Whether (nedical marijuana is a 'common household remedy' is currently mknown. There may be costs associated with making this deter nination. The form of the substance does not greatly matter, unless it is a food or has been processed. DBPR would have little authority over related supplies or devices. Would no : result in a significant regulatory impact to the agency: oversight 3f the plants; nursery stock dealers' license; commercial weights; agricultural inspection stations, etc. Fees would cover any additi mal costs. Deferred t o the Attorney General's office, as per phone call with staff. Referred t1e Conference to a letter that was submitted to the Chief Justi:e and Justices of the Florida Supreme Court detailing several co icerns; among them the interaction of the amendment and currer t federal law. Indicated hat there may be some additional costs, but cannot quantify them at this time. The costs may be due to law enforcemt nt training needs and public education and outreach.

The Florida Association of Counties is unable to make a determina:ion about the financial impact of the proposed amendme it on local governments as per email.

Responded via phone call to staff that they had no input at this time and r aferred the Conference to the Police Chiefs Association.

Email indicating additional enforcement costs based on the experienc( from other states that have similar amendments, but they were Jnable to quantify these costs at this time.

Presentation and email indicating additional enforcement costs based on t le experience from other states that have similar amendments, but they were unable to quantify these costs at this time.

Page 13 of 16

Florida Sales Tax Treatment ofMedical Marijuana

Since medical marijuana is tangible personal property for the purposes of Chapter 212, Florida Statutes, its purchase is subject to Florida sale: and use tax unless a specific exemption exists. In this regard, there were three possible areas of current law exemptions considered by the Conference: prescription-based exemptions, ti e common household remedy exemption, and agricultural-related exemptions.

The Conference has determined that the presc iption-based exemptions do not apply to medical marijuana purchases due to technical constrair ts that include the interaction of state and federal law. The Florida Statutes define a pres ription as "any order for drugs or medicinal supplies written or transmitted by any means c'communication by a duly licensed practitioner authorized by the laws of the state to prescribe such drugs or medicinal supplies and intended to be dispensed by a pharmacist." Current fedt ral law prohibits a physician from writing prescriptions for Schedule i controlled substancas, which would include marijuana. In addition, the proposed amendment establishes a certificetion process that allows the end-user to control both the product type and dosage frequency without the need for an authorizing prescription, making the certification process fundamentally Jifferent from the typical prescription purchase. Moreover, the proposed amendment requires riedical marijuana to be dispensed by a Medical Marijuana Treatment Center that is not required to be a pharmacy. Similarly, the exemption for medical products requires a prescription and wt uld not be applicable to the sales of supplies related to medical marijuana.

The exemption for common household remedie ; does not require the presence of a prescription. Pursuant to Florida Statutes, the C 3partment of Business and Professional Regulation must approve a list of these items, at d that list is then certified to and adopted by the Department of Revenue through the rule-me king process. There is also a process for inclusion of additional items. The existing list co itains a mixture of specifically named remedies and broad classes of remedies. Based on testimony provided by both departments that they are unclear whether the broad classes of remedies p esently on the list encompass medical marijuana, the Conference is left with uncertaint/ regarding the applicability of the exemption. During the discussion, both agencies identified re asons that the exemption may not apply, emphasizing the restrictive nature of the certifici tion process on potential users and the limitation on sales locations to registered Medict i Marijuana Treatment Centers. Because this aspect of the discussion applies equally to a deci: ion regarding the specific inclusion of medical marijuana on a future list, doubt is cast on this at tion as well. However, it is possible that some supplies related to the use of medical marijuana re already on the list so each item would have to be evaluated on a case-by-case basis even if tl. sale of medical marijuana itself is determined to be taxable.

The agricultural-related exemptions apply to sale of medical marijuana when the grower or cultivator sells or dispenses the product directly t 1the end-user or a personal caregiver as defined in the proposed amendment. If the grow3r or cultivator instead selis the product to a third-party retailer (a non-taxable transaction) wi o then sells or dispenses the product to the end-user or the caregiver, the agricultural exempiion on the final sale is lost and that transaction

Page 14 of 16

becomes taxable." However, the determination of whether medical marijuana is a common household remedy becomes significant at this po nt. Since it is unclear whether medical marijuana will ultimately be deemed to be a comnon household remedy, the tax treatment of a sale through a third-party to the end-user is unce -tain.

The only form of medical marijuana that appears especially problematic to the direct application of the above findings regarding taxability is its inclusion as a part of a food product. In this regard, if medical marijuana is determined to be f ransformed from its original form into a distinct food product, then the law and the Depa tment of Revenue's rules regarding food will govern its taxability. The sale of each type of foo i product would have to be evaluated on a case-by-case basis.

Finally, the sales of items such as grow lights and iydroponic systems that might be used for the indoor cultivation of medical marijuana are gener ally taxable. However, there is an exemption from sales tax for "power farm equipment." Accc rding to the Florida Statutes, "power farm equipment" means "moving or stationary equipn-ent that contains within itself the means for its own propulsion or power and moving or stational y equipment that is dependent upon an external power source to perform its functions." l'herefore, grow lights and hydroponic systems that are sold as a component part of power farm aquipment would likely be exempt.

In summary, the revenue impact to state and locs) government from the application of the sales and use tax to the saie of medical marijuana and ielated supplies would range from zero to positive indeterminate because critical details reg arding the specific transactions are currently unknown and key decisions regarding the potential tax exemptions have yet to be made by the affected agencies under their current administrat on of the law. It is also possible that the Legislature would enact new legislation specific tc these questions.

Potential Estimates Related to Sales Tax Impact

in an attempt to quantify the potential magnitude of the sales tax impact, the Conference looked to other states to analyze their results. Of the states that have approved the use of medical marijuana, at least eight states and the District of Columbia have a sales tax structure that could encompass medical marijuana transact ons." Of these, at least three states and the District of Columbia have approved medical marijnana and also have a sales tax provision providing an exemption or partial exemption for cver-the-counter health remedies. It appears that the exemption for common household reme(ies will apply to the sales of medical marijuana in at least Vermont. In New Jersey and Illinois, legislation explicitly made the sale of medical marijuana subject to tax. In the District o Columbia, marijuana's status as a Schedule I drug appears to disqualify it from the exemption. This leaves the experience of five states and the District of Columbia for comparison purposes. Within this grouping, California's collections

According to Jon Mills who spoke via phone conversation on behalf o:the initiative's sponsors, the proposed amendment was drafted to allow various levels of industry integration: both vertica integration of the complete supply chain through one owner and a segmented market structure with independent intermedit ries at each stage. He also indicated that the Legislature or the Department of Health through its rule-making process would hai e the ability to further limit or define the permissible market structure arrangements.

Arizona, California, Colorado, Illinois, Maine, New Jersey, Rhode Islan L Vermont and the District of Columbia have sales taxes. Nevada reportedly has a 2% excise tax at the wholesale and reta l levels.

Page 15 of 16

were by far the highest with projected revenues from the 7.5% state sales tax rate ranging between $58 million and $105 million in 2012.

Temporarily suspending the confusion regarding Florida's final tax treatment of medical marijuana sales, the Legislative Office of Econorr ic and Demographic Research used the information from other states to analyze the pot ential range of state sales tax revenues in the extreme case where no sales tax exemptions apply. The number of users, the consumption per user and the cost of the product are all critical as sumptions and cause the projections to change dramatically as they are varied. Using price data from Vermont, allowable usage from Connecticut, survey data on the illegal use of ma -ijuana for recreational purposes, and two of the estimates of projected Florida users discusse i earlier, the estimated sales tax collections range from a low of $8.3 million to a maximum of $338.0 million. Since the brackets at both ends assume no exemptions apply-and the Con erence believes that at a minimum the exemption for agricultural products will apply in it least some instances-these numbers do not encompass a probable range and cannot be useo for a purpose other than testing significance.

Potential Range of State Sales Tax Revenu)s from Medical Marijuana End-Users Assuming No Sales Tax Exemptions Apply

The Following Examples Demonstrate a Range il at is Generated by Varying Assumptions

Quantity Consumed/ April 1, 2015 Sales ($) State Sales Tax Revenues ($)

Estimation Approach Users $22T oz $4501 oz $2251 oz $450/ oz

Annual use of 3.53 oz (100 g)

1. States with medical marijuana laws IV. Use by cancer patients

417,252 173,671

331,4 12,401 137,918,192

662,804,802 275,876,384

19,884,144 8,276,292

39,768,288. 16,552,583

Annual use of 30 oz (850 g)

L States with medical marijuana laws IV. Use by cancer patients

NOTE: Additional detail can be found at EDR's website:

417,252 173,671

2,816,4 61,000 1,172,2 '9,250

5,632,902,000 2,344,558,500

168,987,060 70,336,755

337,974,120 140,673,510

http://edr.state.flus/Content/constitutional-ameridments/2014Ballot/UseofMarijuanaforcertainMedical onditions/UseofMarijuanaAdditionallnformation.cfm,

Florida Property Tax Treatment of Medical Marijuana

Lands used for growing medical marijuana will likt ly qualify as agricultural property for property tax purposes. This means that the property woult receive a classified use agricultural assessment. Because this treatment may increast or decrease the taxable value relative to its prior value, the impact on property taxes is indetc rminate-both in terms of magnitude and direction.

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CERTIFICATE C F SERVICE

I hereby certify that a true and correct copy of the foregoing has been furnished by U.S. Mail delivery this 7th day of November, 2013, o the following:

Mr. John Morgan Chairperson, People United for Medical Marijuana Post Office Box 560296 Orlando, Florida 32856

Mr. Jon L. Mills Boies, Schiller & Flexner, LLP 100 Southeast 2nd Street, Suite 2800 Miami, Florida 33131

Financial Impact Estimating Conference

Attention: Amy Baker, Coordinator Office of Economic and Demographic

Research 111 West Madison Street, Suite 574 Tallahassee, Florida 32399-6588

I hereby certify that a true and correct copy of t1e foregoing has been furnished via interoffice mail delivery this 7th day of Novemb 3r, 2013, to the following:

Mr. Ken Detzner, Secretary of State ATTN: General Counsel

The Honorable Rick Scott, Governor, State of Florida ATTN: General Counsel

The Honorable Don Gaetz, President, Florida Eenate ATTN: General Counsel

The Honorable Will Weatherford, Speaker, Flor da House of Representatives ATTN: General Counsel

Director, Division of Elections

Mr. Allen Winsor Solicitor General

Gerry Hammond Senior Assistant Attorney General

Fla. Bar No. 0273155

STATE OF F LORIDA 4 S Co

PAM BONDI ATTORNEY GENERAL

November 7. 2013 SC13-2006

The Honorable Ricky Polston Chief Justice, and Justices of

The Supreme Court of Florida The Supreme Court Building Tallahassee, Florida 32399-1925

RE: Use of Marijuana for Certain Medical Conc itions

Dear Chief Justice Polston and Justices:

On October 24, 2013, in accordance witf the provisions of Article IV, section 10, Florida Constitution, and section 16.061, Floridt Statutes, I petitioned this Honorable Court for an advisory opinion on the initiative petition seeking to amend the Florida Constitution to authorize medical marijuana pro Juction, possession, and use.

On November 4, 2013, the Financial Impact Estimating Conference, in accordance with the provisions of section 100.371(5)(a), Florida Statutes, forwarded to this office a financial impact statement on the in tiative petition.

Therefore, I respectfully request this Honorable Court's opinion as to whether the financial impact statement prepared by the Financial Impact Estimating Conference on the constitutional amendment, proposed by initiative petition, entitled "Use of Marijuana for Certain Medical Conditions" (a copy of whict is attached) is in accordance with section 100.371, Florida Statutes.

^ cerely,

Jamela Jo ondi Attorney General

PL-01, The Capitol, Tallahassee, Florida 32399-1050, hiephone (850) 414-3300 Fax (850) 487-2564

Chief Justice, and Justices of The Supreme Court of Florida

Page Two

cc: Mr. John Morgan, Chairperson People United for Medical Marijuana

Mr. Jon L. Mills Boies, Schiller & Flexner, LLP

The Honorable Rick Scott Governor, State of Florida

Mr. Ken Detzner, Secretary Florida Department of State

The Honorable Don Gaetz President, Florida Senate

The Honorable Will Weatherford Speaker, Florida House of Representativas

Financial Impact Estimating Conference Director's Office Attention: Amy Baker, Coordinator

Department of State Division of Elections

Mr. Allen Winsor Solicitor General